The Future Demands Your FlexibilityBy Joshua Weinberger | Posted 2003-09-10 Print
Freedom's just another word for 'nothing left to outsource.'
But freedom on the business side meant complications in the back rooms. We quickly learned that a PC can't do very much if it isn't attached to a lot of data. And if you want it attached to something like that, you're going to need somebody that knows more about what they're doing than you do. You're also going to need somebody even further behind the scenes, managing it all.
In 1981, around the same time, Conoco was bought by DuPont, and I saw an opportunity. Done correctly, we could give our business people all that freedom by having, say, a common operating environmentand then by having somebody around to maintain that environment, to help them when they were in trouble. Freedom, in other words, meant letting people get more out of the technology by dealing with less of it themselves. That's the idea behind outsourcing.
Fifteen years later, DuPont signed a $4 billion, 10-year, worldwide outsourcing agreement with Computer Sciences Corp. (CSC) and Accenture. At the time, it was the largest deal of its kind. As chief information officer, I drafted a business model depicting where DuPont was and what it was likely to look like years ahead. We were changing businesses, and we had to decide: Were we going to spend a great deal of money on our own, or were we going to partner with firms that had the flexibility and the capabilities we needed? We'd already taken a lot of costs out since the acquisition of Conoco, so even though we wanted more savings, the main driver was: How are we going to provide DuPont with the freedom it needs for the future?
It didn't take very long to see that the agreement was solidand flexible. The biggest of our data centers was in Wilmington, Del., and CSC combined all the others into that one. But there was one center in Oklahoma, in the heart of Conoco's traditional territory. The people at Conoco wanted to hold onto it, thinking it was core to their operations. It wasn't a "make-or-break" situation, but it was one thing we had to work throughand in the end, Conoco did hold onto it.
But when DuPont divested itself of Conoco in 1998, the plan faced its one true test: How to keep an outsourcing contract in effect, when the legal entities involved change.
We'd foreseen the possibility in the original business model. We planned for lots of contingencies. But we had no way of knowing it would actually happen.
Once you get into a true outsourcing situation, though, you're never going back.The only way out is if you or the companies you're dealing with go broke. We went through a bit of trauma, but the outsourcing deal survived, in pieces, at DuPont and Conoco.
The pieces then have to be managed in a more measured way, because there are service-level agreements to maintain. There will be metrics that you weren't as strict about tracking on your own, such as overall productivity or the costs of executing a particular business process. With a good agreement, you'll figure out much more about how the outsourcer's doing than you knew about your own efforts in the past.
Outsourcing helps companies understand how to think about their processes. The first thing you have to understand is what's core and what's non-core. That's work you have to do before the outsourcing begins. And if you're going to outsource something critical to your operation, you'd better be in business with somebody you trust. All the pieces you're holding onto still rely on the piece you're sending out.
There will always be elements you don't outsource, something core to the company you simply can't let go of. At DuPont one of those was the research groupDuPont simply doesn't outsource research. But now it has the freedom to focus on the part of its business that it does best.
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